Pandora emerges mostly unscathed in legal showdown with songwriters

Royalties for streaming radio service will stay at 1.85 percent through 2015.

On Friday, a federal judge ruled that the streaming radio service Pandora will continue paying the same royalty rate it was previously required to pay to songwriters through 2015.

In her opinion, US District Judge Denise Cote wrote that Pandora must continue paying the American Society of Composers Authors and Publishers (ASCAP) 1.85 percent of its revenue from the years 2011 through 2015 to use ASCAP songs on its streaming music service.

The 1.85 percent figure Pandora will pay is higher than the 1.7 percent rate that Pandora hoped for—1.7 percent is what terrestrial radio stations are required to pay for digital webcasts. Still, Cote's ruling is much closer to Pandora's suggestion than ASCAP's; the songwriters' group wanted to see a rate that started at 1.85 percent, then rose to 2.5 percent in 2014 and three percent in 2015.

Despite failing to convince the court of their desired rate, ASCAP nevertheless declared victory. "We are pleased the court recognized the need for Pandora to pay a higher rate than traditional radio stations," said ASCAP CEO John LoFrumento.

Sony/ATV Music CEO Martin Bandier was less eager to declare this outcome as favorable for artists. "This rate is woefully inadequate and further emphasizes the need for reform in the rate court proceedings," he told Billboard. "Songwriters can’t live in a world where streaming services only pay 1.8 percent of their revenue. This is a loss and not something we can live with."

This small victory for Pandora won't fundamentally change its long-term business concerns, which center around copyright payments. Pandora pays out about half of its revenue in copyright license fees, with the great majority of that going to record labels, not ASCAP.